Commercial Real Estate
In Delhi NCR's commercial office sector, we have seen moderate to healthy levels of net absorption over the past three years. Absorption in 2013 was the lowest in nine years, despite promising leasing activity. This was primarily because occupiers were focused on cost saving and portfolio rationalisation.
The IT/ITeS sector has been the dominant performer, contributing a major share of leasing volumes while the manufacturing and industrial sector has also shown good traction of late. While Gurgaon remains the most favoured destination of office occupiers, Noida has also performed well. However, while Gurgaon has seen a good mix of IT and corporate occupiers, Noida still remains primarily driven by IT.
Over a 1-3 year horizon, we are likely to see an improvement in demand and absorption as economic conditions in the US and Western Europe are showing signs of stabilising. This is likely to increase outsourcing business into India, which will result in improved performance of the office sector. Indian domestic corporates are also likely to continue contributing towards non-IT demand..
From an investment perspective, it makes more sense to opt only for leased assets in the current scenario. Larger investors should consider the domestic private equity funds being raised, which are looking at investing in commercial assets.
